Buying a home when you are self employed, or even refinancing, can be a struggle. The main reason for this is not what you think; it’s not about irregular income amounts. It is more to do with having a two year tax history. Filinng your taxes on time is essential and it can help you get a mortgage on a home of your own.
Proof of Income
You don’t need to shop around to find a lender that is happy to lend to self-employed people, it is possible here. You will need to provide proof of you income, but as you will be unlikely to have a pay stubyou will need other documentation. You can get this by keeping on top of your tax returns. If you don’t we will have no solid proof to go on.
Return your tax information on time
Your taxes should be returned by the 15th of April, so plan well in advance to ensure you get it in on time. You will need a minimum of two years proof of income to show and should ensure that the only reductions shown on them are legitimate, as those that are not could greatly decrease your disposable income. The reductions could mean that you are not eligible for a loan as high as you would without. Writing off all your income is a BAD thing for buying a house!
Provide quarterly statements
You will also need to provide a statement if buying a home self-employed showing quarterly gains and losses, so should keep on top of these too. Even if it is going to be a while before you apply, it will help you or your accountant to stay on top of your books. The better you keep your books up to date and file tax returns, the faster you will be eligible for a mortgage.
Improve your credit rating
In addition to needing to have tax returns to get a mortgage, you will also need a good credit rating. This too can be difficult if you can’t provide proof of income. You can use your tax returns to obtain a credit card if you don’t already have one to prove you can keep up with repayments. Although it may be tempting to spend what you are given in credit, you should only spend what you can pay off each month as this will look good on your credit report and be appealing to potential lenders. Use the card to purchase gas or something easy and ensure you have a personal card, not just a business one to support your application and always pay your balance down!
There is no need to be penalized because you don’t work for an employer. Many self-employed people even after deductions are able to earn more than those who are working for a company, which is why it can be frustrating when they are refused a mortgage they know they can afford. Remember, the cutoff date for returns is April 15th. It will not only help you with buying a home self-employed, filing your taxes on time could stop you from being penalized in other ways too!
Buying a home if you are self employed is possible! Contact us to find out how.